BE4-1 Transactions that affect earnings do not necessarily affect cash. Identify the effect, if any, that each of the following transactions would have upon cash and net income. The first transaction has been completed as an example.
Cash NetIncome
(a) Purchased $100 of supplies for cash. -$100 $0
(b) Recorded an adjusting entry to record use of $20 of the above supplies.
(c) Made sales of $1,300, all on account.
(d) Received $800 from customers in payment of their accounts.
(e) Purchased equipment for cash, $2,500.
(f) Recorded depreciation of building for period used, $600.
Click here for the solution: Transactions that affect earnings do not necessarily affect cash
Showing posts with label affect. Show all posts
Showing posts with label affect. Show all posts
Friday, October 9, 2015
Sunday, September 13, 2015
Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards
Auditing P 3-31
Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards. This standard reads, "The auditor must identify in the auditor's report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period." Assume that the following list describes changes that have a material effect on a client's financial statement for the current year:
1. Correction of a mathematical error in inventory pricing made in a prior period.
2. A change from prime costing to full absorption costing for inventory valuation.
3. A change from presentation of statements of individual companies to presentation of consolidated statements.
4. A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred because future benefits of the costs have become doubtful. The new accounting method was adopted in recognition of the change in estimated future benefits.
5. A change from the completed-contract method to the percentage-of completion method of accounting for long-term construction contracts.
6. A change in the estimated useful life of previously recorded fixed assets based on newly acquired information.
7. A change to including the employer share of Social Security (FICA) taxes as "retirement benefits" on the income statement from including it with "other taxes."
8. A change from FIFO method of inventory pricing to the LIFO method of inventory pricing.
Identify the type of change described in each item above, and state whether any modification is required in the auditor's report as it relates to the second standard of reporting. Organized your answer sheet as shown. For example, a change from the LIFO method of inventory pricing to the FIFO method in inventory pricing would appear as shown.
Assume that each item is material.
Item No. Type of Change Should Auditors report be modified?
Example An accounting change from one GAAP "Yes" to another GAAP
Click here for the solution: Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards
Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards. This standard reads, "The auditor must identify in the auditor's report those circumstances in which such principles have not been consistently observed in the current period in relation to the preceding period." Assume that the following list describes changes that have a material effect on a client's financial statement for the current year:
1. Correction of a mathematical error in inventory pricing made in a prior period.
2. A change from prime costing to full absorption costing for inventory valuation.
3. A change from presentation of statements of individual companies to presentation of consolidated statements.
4. A change from deferring and amortizing preproduction costs to recording such costs as an expense when incurred because future benefits of the costs have become doubtful. The new accounting method was adopted in recognition of the change in estimated future benefits.
5. A change from the completed-contract method to the percentage-of completion method of accounting for long-term construction contracts.
6. A change in the estimated useful life of previously recorded fixed assets based on newly acquired information.
7. A change to including the employer share of Social Security (FICA) taxes as "retirement benefits" on the income statement from including it with "other taxes."
8. A change from FIFO method of inventory pricing to the LIFO method of inventory pricing.
Identify the type of change described in each item above, and state whether any modification is required in the auditor's report as it relates to the second standard of reporting. Organized your answer sheet as shown. For example, a change from the LIFO method of inventory pricing to the FIFO method in inventory pricing would appear as shown.
Assume that each item is material.
Item No. Type of Change Should Auditors report be modified?
Example An accounting change from one GAAP "Yes" to another GAAP
Click here for the solution: Various types of "accounting changes" can affect the second reporting standard of the generally accepted auditing standards
Friday, August 21, 2015
Discuss how the following affect the break-even point
Discuss how the following affect the break-even point: increase or decrease in unit sales price, increase or decrease in variable cost per unit, increase or decrease in fixed costs.
Click here for the solution: Discuss how the following affect the break-even point
Click here for the solution: Discuss how the following affect the break-even point
Monday, July 6, 2015
Gagliano is introducing a new product using either a capital-intensive method or a labor-intensive method, which will not affect the quality of the product
Gagliano is introducing a new product using either a capital-intensive method or a labor-intensive method, which will not affect the quality of the product. Estimated manufacturing costs as follows:
Capital-Intensive
Direct Materials $5/unit
Direct Labor $6/unit
Variable Overhead $3/unit
Fixed Manufacturing Costs $2,508,000.
Labor-Intensive
Direct Materials $5.50/unit
Direct Labor $8.00/unit
Variable Overhead $4.50/unit
Manufacturing Costs $1,538,000
Introductory unit sales price of $30. Incremental selling expenses are estimated to be $502,000 annually plus $2/unit sold, regardless of manufacturing method.
Instructions:
(a) Calculate the estimated break-even point in annual unit sales of the new product if Gagliano Company uses the: (1) capital-intensive method (2) labor-intensive method.
(b) Determine annual unit sales volume at which they would be indifferent between the two methods.
(c) Explain when both should be employed.
Click here for the solution: Gagliano is introducing a new product using either a capital-intensive method or a labor-intensive method, which will not affect the quality of the product
Capital-Intensive
Direct Materials $5/unit
Direct Labor $6/unit
Variable Overhead $3/unit
Fixed Manufacturing Costs $2,508,000.
Labor-Intensive
Direct Materials $5.50/unit
Direct Labor $8.00/unit
Variable Overhead $4.50/unit
Manufacturing Costs $1,538,000
Introductory unit sales price of $30. Incremental selling expenses are estimated to be $502,000 annually plus $2/unit sold, regardless of manufacturing method.
Instructions:
(a) Calculate the estimated break-even point in annual unit sales of the new product if Gagliano Company uses the: (1) capital-intensive method (2) labor-intensive method.
(b) Determine annual unit sales volume at which they would be indifferent between the two methods.
(c) Explain when both should be employed.
Click here for the solution: Gagliano is introducing a new product using either a capital-intensive method or a labor-intensive method, which will not affect the quality of the product
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